Dutch economic recession ends with first quarterly growth reported in a year

The Netherlands appeared to exit its economic recession towards the end of last year, with CBS announcing a slight growth in gross domestic product in the fourth quarter. The growth equated to a 0.3 percent rise, the national statistics office said in its first estimate. It also indicated that the recovery in the last three months of the year meant that GDP rose by 0.1 percent over the course of 2023.

The growth in the fourth quarter “follows three consecutive quarters of GDP decline. The increase in GDP in the fourth quarter is mainly attributable to household consumption,” the CBS wrote.

Household consumption increased by 1.8 percent in the fourth quarter of 2023 compared to the third quarter. “Apart from some coronavirus quarters, that is the largest growth in consumption that we have seen in a long time,” CBS chief economist Peter Hein van Mulligen said in an explanation of the figures.

The higher household spending is largely due to the strong labor market, Van Mulligen said. More and more people have paid work and wages increased significantly. “In combination with falling inflation, this provided a significant boost in purchasing power. And people immediately spent that extra money.”

Adjusted for price changes, Netherlands residents spent more on things like clothes, restaurants, museums, and holidays but less on food.

Consumers’ extra spending benefited the culture, recreation, and other services sector. The sector’s added value - the difference between production and consumption of energy, materials, and services - rose by 3.0 percent compared to the third quarter - the highest increase of all sectors. Agriculture and fishing’s added value rose by 2.1 percent, and industry’s by 1.3 percent.

Government consumption grew slightly, by 0.4 percent. But investments in fixed assets fell by 2.1 percent, with investments in homes, commercial buildings, means of transport, and machinery falling the most. Construction also had a mediocre quarter. “And consumer and business confidence is still negative,” Van Mulligen said.

The chief economist stressed that it is still too early to say that the worst is over and the economy is growing again. “This is only one quarter.”

Last week, the International Monetary Fund also predicted gloom for the Dutch economy, lowering its growth forecast for this year and next. In October, the IMF expected 0.6 percent growth for 2024 and 1.1 percent in 2025. In its latest forecast, it lowered that to 0.2 and 0.7 percent, respectively.

The Dutch economic growth in the fourth quarter was higher than the European Union average of 0.0 percent. In Belgium, the economy grew by 0.4 percent, in France, it remained the same, and Germany’s economy shrank by 0.3 percent.